Category Archives: China-U.S.

Qin Gang Replaces Wang Yi As China’s Foreign Minister

Screenshot of the annoucement of Qin Gang's appointment as Minister of Foreign Affairs, succeeding Wang Yi, December 30, 2022

QIN GANG, CHINA’S Ambassador to Washington, has been appointed the country’s Foreign Affairs Minister, succeeding Wang Yi.

Wang, 69, who has been foreign minister since 2013, was promoted to the Politburo in October and is expected to succeed Yang Jiechi as the Party’s top foreign policy official, a more senior role than foreign minister.

The 56-year-old Qin has only been in post in Washington since July 2021. However, he is liked by Xi Jinping, whose early dealings as President with other foreign leaders would have been facilitated by Qin when he was the foreign ministry’s head of protocol between 2014 and 2018.

His appointment signifies the importance Xi attaches to managing the relationship with the United States.

Qin was a proto-wolf warrior in two stints as the foreign ministry’s spokesman. However, as ambassador in Washington, where Beijing’s more assertive foreign policy has contributed to a hardening of elite and popular attitudes against China, he tried to straddle maintaining a hard line in defending Beijing’s interests and presenting a softer face to Chinese diplomacy.

That will likely be his brief as foreign minister, too. Yet, any change will be one of style more than substance.

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China Lifting International Travel Ban Causes Concern

THE UNITED STATES is considering following Japan, Malaysia, Taiwan and India in imposing restrictions on arrivals from China now that Beijing is to allow its citizens to travel internationally again from January 7.

European countries such as Germany and the United Kingdom are monitoring the situation.

Traffic to web travel sites in China has sharply increased since authorities announced the coming lifting of the last of the zero-Covid restrictions earlier this week.

Searches for Hong Kong, which has now lifted all its Covid restrictions, Macau and neighbouring countries like South Korea, Japan and Thailand, were the most popular.

However, it will take some time for airlines to restore capacity on their China routes. Business travel is likely to rebound before tourist trips.

Nonetheless, foreign countries are concerned by the number of infected travellers arriving and the possibility that new virus mutations will occur within a population among which the infection rate is surging.

At this point, new mutations are a theoretical possibility more than an immediate threat.

Restrictions are likely to include a requirement for visitors to be fully vaccinated and to show a recent negative test.

The United States already requires the former of all arrivals, but not the latter. A mandatory negative test on arrival from China is one measure under consideration. Malaysia, Japan and Taiwan now require it.

Responding to a question about the prospect of restrictions, Foreign Ministry spokesperson Wang Wenbin highlighted the need for more international travel to maintain the stability of global supply chains and restore the growth of the world economy, underlying the economic imperatives currently driving China’s public health policy.

Updates:

  • The United States is to require all arrivals from China to show a negative Covid test.
  • Italy says it will test all arrivals from China after almost half of the passengers on two flights to Milan from China were found to have the virus. 
  • However, the EU is saying that screening all arrivals from China is unjustified at this point as the BF7 omicron variant that is prevalent in China is already present in Europe but has failed to become dominant.

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Filed under China-Japan, China-Southeast Asia, China-U.S., Politics & Society

China Scrambles For The High Ground In Chip War

HARD ON THE heels of the World Trade Organization (WTO$ ruling against the Trump-era US tariffs on steel and aluminium from China and other countries. China has filed a complaint about US export controls on sales of advanced semiconductors and the equipment to make them.

Beijing is alleging that these are protectionist, an overreach of national security arguments for trade measures and undermine the international economic and trade order.

To this Bystander, China seems to be scrambling to attain the high ground rather than escalating the trade and technology confrontation between the two countries.

With Japan and the Netherlands, the two other significant players in advanced chip making, falling into line with the US strategy of denying China the technology, a complaint to the WTO is likely to have little practical impact, especially in the short and medium terms.

Chinese companies’ efforts to find loopholes in and workarounds to the US sanctions are likely to be more productive.

Mainly, filing a WTO complaint will let Beijing portray Washington as a unilateralist willing to build coalitions of its allies outside multilateral institutions, a message mostly directed at developing nations.

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Filed under China-U.S., Technology, Trade

US Further Closes The Door To Chinese Tech Companies

Screenshot of US Federal Communications Commission order baning authorisation for sale in United States of products from five Chinese tech companies, November 21, 2022

THE FIRST RESTRICTIONS on Chinese telecom equipment being used in US networks because of security concerns came from the Obama administration. The Trump administration stepped them up dramatically, particularly against kit made by Huawei and ZTE. The Biden administration has now widened the restrictions further.

On November 26, the US Federal Communications Commission (FCC) said no equipment produced by Huawei, ZTE, two companies that make video surveillance equipment, Hikvision and Dahua, and two-way radio systems supplier, Hytera, would be authorised for use in the United States, citing national security grounds.

The ban is not retroactive, so the five firms can still sell their products and services previously approved for sale in the United States. However, the FCC is seeking comment on future revisions to the rules regarding equipment already authorised to be imported or sold. To this Bystander, that appears to be a step down the path towards future revocation of existing approvals.

The FCC specifically mentioned a threat to US citizens’ data security. The five companies have previously all denied supplying data to Chinese authorities.

Hikvision is the only one of the five to respond publicly so far, saying the ruling will 

make it more harmful and more expensive for US small businesses, local authorities, school districts, and individual consumers to protect themselves, their homes, businesses and property.

Its security cameras, like those made by Dahua, are widely used by US government agencies. Many police departments in the United States use Hytera radios.

The latest bans fit a broader pattern of containing the development of China’s indigenous tech industry. The Biden administration has also expanded US export controls to prevent the sale of advanced US hardware and software to China, especially that for making cutting-edge semiconductors. 

It is also pressuring US tech companies to move their supply chains out of China. The reported decision by the Taiwanese contract manufacturer Foxconn to move half its global iPhone production for Apple from China to India would be a significant win for the Biden administration; it would also disrupt the huge networks of sub-contractors and component makers and assemblers that feed into Foxconn’s Chinese supply chains. That would diminish the economies of scale benefiting the smaller Chinese companies, which also supply indigenous brands.

US officials and the US arm of ByeDance’s short-form video platform, TikTok, are also discussing how TikTok can assuage concerns that the data it collects on its US users will not be shared with Chinese authorities. Calls for the app to be banned in the United States are increasing, particularly from Republican lawmakers. 

However, the politics of banning a popular consumer app, especially among younger US citizens who vote 2-1 Democrat rather than Republican, complicate any decision the Biden administration might take, including following through on a Trump administration proposal that TikTok be forcibly divested to a US owner.

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Xi And Biden Say The Right Things But Change Little

Chinese President Xi Jinping meets with US President Joe Biden in Bali, Indonesia, Nov. 14, 2022. Photo credit: Xinhua/Li Xueren

THE MEETING BETWEEN Xi Jinping and US President Joe Biden on the sidelines of the G20 summit in Bali, Indonesia (seen int eh photo above) exceeded the low, very low expectations that had been set for it.

That is not to say that agreements of substance came out of it. They did not. Yet the right things were said on both sides so that the China-US relationship does not get any worse.

The ‘facts on the ground’ may yet prove to belie that. The meeting lasted some three hours, indicating the range of issues that divide the two powers — Taiwan, Ukraine, North Korea, Uighurs, Hong Kong. The list goes on.

That Biden was accompanied by his Treasury Secretary, Janet Yellen, Secretary of State Antony Blinken and National Security Advisor Jake Sullivan was another indication of how broad the range of economic, diplomatic and security areas in which the two countries are facing off has become.

The two sides’ readouts of the meeting make for illuminating comparisons. Most notably on the use of nuclear weapons in Ukraine.

The US version said the two leaders agreed on the importance of not using nuclear weapons there, implying some divisions between China and Russia and that Biden had some leverage; the Chinese version said nothing on the matter.

However, separately, the Foreign Ministry says Beijing will increase, not decrease its relationship with Moscow. Yet, why wouldn’t it if a supply of needed raw materials is available at war-discounted prices? Undoubtedly, China would prefer peace to war, but a frozen conflict would be an acceptable status quo for it.

Xi also made it clear that Taiwan was China’s first red line. Biden restated that nothing had changed in regard to its One China policy, which is at odds with the increasingly supportive stance the United States is taking towards the island. When he gets home, Biden will be facing, in all likelihood, a Republican-controlled House of Representatives in 2023 and 2024 that is likely to be even more hawkish on China than the outgoing one.

The one consequence of the meeting is that there will be more dialogue between the two sides at senior official level. That will not in itself improve the tenor of the bilateral relationship but it may keep it from deteriorating and encourage some baby steps in confidence-building.

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End of Jeep’s China JV May Be Prelude For Others

Screenshot of Stellantis press release announing bankruptcy of Jeep joing venture in China

IT HAS BEEN a long and winding road for Jeep in China, as the song has it, which has now ended in the bankruptcy filing of the joint venture (JV) between Guangzhou Automobile Group (GAC) and Stellantis.

The former AMC was the first US automaker to have a production JV in China, setting up Beijing Jeep joint venture in 1984. A succession of ownership changes followed: Chrysler acquired AMC; then Fiat bought Chrysler to create Fiat Chrysler, which became Stellantis after a merger with Peugeot and Citroen maker PSA in 2021.

However, with sales declining and having missed the switch to electric vehicles by Chinese consumers, Stellantis announced in July that it would end the JV.

At the time, its chief executive, Carlos Tavares, cited the growing ‘political influence’ in doing business with partners in China and indicated that the group would switch from local production to importing.

Some commentators seized on this as evidence of ‘decoupling’ in the face of deteriorating US-China relations and an example of a foreign multinational lightening its footprint n China. However, to this Bystander, Setllantis’s case seems sui generis.

Jeep’s sales in China fell to barely 20,000 vehicles in 2021, half the previous year’s total and one-tenth of 2017’s number. The decline has continued this year, with fewer than 2,000 vehicles sold.

Elon Musk’s EV maker Tesla is the only foreign automaker that has not been required to produce in China through a JV. That is a sign of the growing confidence of the domestic industry that it no longer needs foreign technology and expertise as it once did. That is especially true for EVs, which now account for between one-fifth and one-quarter of new car sales in China.

Last year, foreign automakers’ share of the Chinese car market overall, the world’s largest, fell to 45.6% in 2020, a 6.9% decline from 2020, according to China Passenger Car Association.

That is two-thirds of its peak and falling. Trade estimates put foreign carmakers’ EV market share at around 20%.

If those trajectories continue, more foreign auto JVs will follow Jeep in folding.

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Filed under China-U.S., Industry, Transport

Traditional Security Issues Will Drive US Stance Towards China

Screenshot of cover page of US National Security Strategy document, 2022

THE MUCH-DELAYED UNCLASSIFIED version of the US National Security Strategy (NSS) published on October 12 repeats that China poses the greatest challenges to US interests and frames the competition between the two in terms of democracy versus autocracy.

Both are guiding principles of US President Joe Biden’s foreign policy, and it is to be expected that they would be laid out in a document intended to provide a basis for the US Congress to approve the budget to support it.

Biden has hardened Washington’s change of stance towards Beijing from cooperative containment to confrontational constraint made by his predecessor, Donald Trump. Trump took a 19th-century realpolitik view of the rivalry as a contestation for the primacy of two nation-states’ interests. Biden views it as a struggle to determine the governance of the international order.

The NSS states it thus:

The PRC is the only competitor with both the intent to reshape the international order and, increasingly, the economic, diplomatic, military, and technological power to do it. Beijing has ambitions to create an enhanced sphere of influence in the Indo-Pacific and to become the world’s leading power. It is using its technological capacity and increasing influence over international institutions to create more permissive conditions for its own authoritarian model, and to mold global technology use and norms to privilege its interests and values.

As the NSS lays out three perceived threats from China — economic, military and human rights challenges — the Biden administration’s strategic response is similarly three-pronged.

The first is to strengthen the domestic foundations of US power by improving US innovation, investment and competitiveness while promoting the values of democracy.

The second is greater cooperation with US allies and partners in inclusive ways that emphasise the importance of rules-based order and mutual respect.

The third is competing ‘responsibly’ with China while building trust and transparency through improved communication and working together where interests align.

The last of these is a rubric for a section of the NSS that outlines what it says is a fundamental need to engage constructively with Beijing on significant transnational issues.

We will always be willing to work with the PRC where our interests align…That includes on climate, pandemic threats, nonproliferation, countering illicit and illegal narcotics, the global food crisis, and macroeconomic issues…No country should withhold progress on existential transnational issues like the climate crisis because of bilateral differences.

Within the adversarial nature of the relationship that the NSS describes — and on the ground — this Bystander struggles to imagine how the two countries could create the context for such cooperation.

However, the NSS is much clearer on the Taiwan issue.

We have an abiding interest in maintaining peace and stability across the Taiwan Strait…We oppose any unilateral changes to the status quo from either side, and do not support Taiwan independence. We remain committed to our one China policy, which is guided by the Taiwan Relations Act, the Three Joint Communiques, and the Six Assurances. And we will uphold our commitments under the Taiwan Relations Act to support Taiwan’s self-defense and to maintain our capacity to resist any resort to force or coercion against Taiwan.

To this Bystander, that underlines how traditional security issues will underpin the Biden administration’s policy, no matter how much it would have hoped to bring transformative security thinking to address transnational problems when it took office, much as it has tried to do in trade.

Russia’s invasion of Ukraine, the loose and shape-shifting coalition of anti-US allies (China, Russia, North Korea, Iran) and fence-sitters (the raft of developing countries that do not want to swap the hegemony of one global power for another or have ambitions of their own of being regional powers, India, Saudi Arabia, Turkey), and the prospect of Republican control of the US Congress after November’s Midterm elections in November will reinforce that reversion to the traditional.

The return of a populist president to the White House after the 2024 US presidential elections would likely mean that any pretence of US-China relations being anything but a struggle between nation-states would go away completely.

That outlook will probably be reflected in whatever comes out of the 20th Party Congress starting on Sunday.

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Biden Kicks Xi When He’s Up

WITH THE 20TH Party Congress starting on Sunday, the United States has timed two announcements that are only likely to reinforce the sense in Beijing that Washington is bullying it.

The more recent, the newly published unclassified version of the US National Security Strategy, identifies China as the main threat to US interests, saying it is the only country with both the intent and the means to reshape the international order.

It repeats a phrase used by US Secretary of State Antony Blinken earlier this year, emphasising how the United States must ‘invest, align and compete’ with China, which he described in the same speech as ‘the most serious long-term challenge to the international order’.

US President Joe Biden sees President Xi Jinping as an authoritarian leader who is antipathetical to Western democracy and needs to be checked not only by hard power but also by strengthening the US economy and its political institutions to negate Xi’s narrative that this is ‘China’s moment’..

The earlier announcement was regarding new restrictions on the export to China of US advanced technology, notably chipmaking equipment, published on October 7. These will significantly slow China’s development of advanced semiconductors and dependent technology, a high priority for Beijing for economic development and military applications.

They constitute a significant escalation in Washington’s confrontation with Beijing.

In both technology and security, Biden is making sure that the United States does not soften its focus on China, deflected by Russia’s invasion of Ukraine.

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Filed under China-U.S., Defence, Technology

China Now Routinely Riled By US Over Taiwan

THE LATEST PACKAGE of US military kit that the Biden administration has approved for sale to Taiwan has drawn predictable condemnation from China.

The $1.1 billion deal includes a radar warning system to track incoming strikes and Harpoon anti-ship and Sidewinder anti-aircraft missiles, Taipei’s need for which was demonstrated by the People’s Liberation Army’s live-fire exercises following the visit to the island last month by US House Speaker Nancy Pelosi.

A further round of live-fire drills followed the mid-month visit to the island by a separate group of US lawmakers.

The Chinese embassy in Washington told the United States to rip up a deal that it said ‘severely jeopardises’ relations and promised ‘necessary countermeasures. 

The US arms sale still has to be approved by the US Congress, but the votes are sure to be there. US legislators have become increasingly pro-Taiwan and anti-Beijing.

The US administration says the deal is part of continuing efforts to modernise Taiwan’s armed forces, as it is presenting most of its Taiwan policy as routine in counterpoint to Beijing’s belligerence.

Similarly, US officials say they will soon start discussions on a US-Taiwan trade agreement to be concluded by next year. That has already drawn warnings from Beijing not to include anything that implies Taiwanese sovereignty.

The missile sales appear to be catch-up, fulfilling orders placed by Taiwan in the past that went unfulfilled as the United States sent weaponry to Ukraine. Nonetheless, there is no masking that ‘a new normal’ now applies to US-China relations.

With Beijing increasing its ‘grey zone’ activity — somewhere between civilian and military operations — the risks of escalation are growing.

Last week, Taiwan shot down a Chinese drone in Taiwanese airspace for the first time. The downed quadcopter (of the sort that anyone can buy on Alibaba; it was not an unmanned military aircraft) was one of several that have been flying over the Taiwan-controlled islands a few kilometres off the mainland coast for the past month.

These have likely been on intelligence-gathering missions. An ulterior motive may have been to have one shot down to allow Beijing to portray itself as the victim of aggression by foreign forces.

The sturm and drang over the arms deal have let another Biden administration decision announced at the end of the week fly under the radar. The United States will keep in place Trump-era tariffs on Chinese imports. 

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US Businesses In China Face Testing Times

THE LATEST ANNUAL SURVEY survey of its members by the US-China Business Council shows less optimism among US companies operating in China about the business outlook for the country than at any time since the Council started asking. 

Barely half of the 117 firms surveyed expressed optimism about the business outlook for the next five years, a record low. One in five said they were pessimistic.

Two points to note: the respondents to the Council’s survey tended to be their members that are large, US multinationals that have operated in China for more than 20 years and thus are committed to the China market for the long-term and have an understanding of its vagaries — ‘in China, for China’ in the argot.

Second, the survey was fielded before the visit of US House Speaker Nancy Pelosi to Taiwan, which prompted a sufficiently belligerent reaction from Beijing that many US-based chief executives started reviewing their China strategies. The timing may explain why zero-Covid pipped US-China tensions as companies’ top concerns. The survey’s key takeaways:

• China’s COVID-19 policies are the top challenge: China’s COVID-19 strategy now poses the top challenge to US companies, displacing US-China relations, which ranked as the top concern for four consecutive years. The looming possibility that companies will again be forced to partially halt operations due to lockdowns and the impacts of local controls on consumer demand have undermined confidence in the business environment.

• Bilateral tensions continue to hurt American companies: Respondents report record-high concern with US-China relations, which continue to deteriorate. Geopolitical pressures are bleeding into the commercial realm, leaving companies—which depend on a stable and predictable trade environment—in increasingly challenging positions. Chinese customers’ real and perceived concerns about ongoing access to US technology due to US-China tensions continue to threaten US companies’ competitiveness in the market, an alarming trend that could be difficult to reverse.

• Little progress on long-standing issues as new barriers emerge: Significant market access barriers remain, even as China assures foreign companies that they will receive equal treatment. Intellectual property (IP) protection has seen limited improvement. Chinese economic planners have expanded industrial policies to bolster Chinese companies, and localization requirements to qualify for state-affiliated procurement are increasing. At the same time, new Chinese data security and privacy rules threaten to disproportionately increase costs for multinational companies.

• Trajectory of commercial relations at another inflection point: The difficult operating and geopolitical environment has impacted company performance, leading to record levels of pessimism and affecting companies’ decisions about their supply chains and future investments. At the same time, companies overwhelmingly remain profitable in China and they continue to recognize China’s importance to their global competitiveness. Whether business sentiment and the pace of future investment rebound or continue to falter will depend on decisions by US and Chinese policymakers in the coming months and years.

Zero-Covid policies, regulatory crackdowns to align business with national goals and tensions with the United States will likely continue for the foreseeable future and have a long-term impact on foreign companies operating in China. 

Perhaps most damagingly for firms’ confidence is that they underline the secondary position to the state to which business is relegated. For a handful of companies, that will lead to exiting the market in whole or part, as companies that source products or raw materials, rather than sell into the Chinese market, are starting to do. 

However, for those unwilling to give up on the markets offered by the world’s second-largest economy, large enough to segregate their global supply chains, and with the means and will to do so, it will probably mean hunkering down for several uncomfortable and testing years.

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